The Right Rx?
By Oliver Ryan, FORTUNE

(FORTUNE Magazine) - Will Internet prescription services ever be legit?

Peter Ax, former head of private equity at Lehman Brothers, certainly thinks so. In 2001 he purchased KwikMed, a legally troubled e-tailer of erectile-dysfunction drugs. After 14 months spent overhauling the company, he won a consent order from the state of Utah for the right to prescribe drugs online--a first in the U.S.

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The order has been fiercely opposed by Viagra maker Pfizer (Research) and the full complement of national medical associations. "Internet pseudo prescribing is the functional equivalent of pushing amphetamines at a truck stop," says Pfizer lawyer Arnold Friede. But KwikMed and its proponents say the company is a health-care innovator with the potential to drive down costs, and the legality of its business has been upheld by the Utah state legislature.

The debate--fueled by federal stings of rogue web pharmacies last year, which shut down 4,800 sites--will get its first dose of empirical evidence next month with the release of a study by Mark Munger, a dean in the College of Pharmacy at the University of Utah. Munger compared a sample of KwikMed patient records with data from a typical family clinic setting and, according to a sneak peak provided to FORTUNE, found that, at least for erectile-dysfunction medications, KwikMed's prescription process is just as safe. (Munger says he's taken no funds from KwikMed.)

KwikMed relies on an extensive online interview, the results of which are forwarded to a physician, who may approve or reject a prescription or follow up with further questions. The company argues that the approach makes sense for self-diagnosed conditions indicating relatively safe medications. "I don't believe we do away with all physical exams," says Ax. "What I do believe is that 20% to 50% of all physician visits are unnecessary." Ax hopes to expand KwikMed's offering to allergy and cholesterol drugs. Last year the company generated only $25 million in revenues, but monthly orders were up nearly 50%.

The Munger study is not likely to appease detractors. KwikMed is "not the 'standard practice of medicine,' " says James Rawson of the Federation of State Medical Boards, whose requirement of an initial visit to a doctor's office before any prescription is written carries enormous weight with regulators. When FORTUNE tested KwikMed's system with an order of Viagra, it was approved immediately. That was followed by a call from a KwikMed doctor, who canceled the order for us. But the next day, three blue pills arrived anyway. Apparently, there are still kinks in the system. Top of page